Earlier this month, European Commission (EC) president Ursula von der Leyen made a seemingly monumental announcement for European security when she released a statement on the ‘ReArm Europe’ defence package. A topline figure of €800bn ($872bn) was a welcome shock for supporters of European strategic autonomy. Currently, details about the ReArm Europe plan remain limited, but two areas of focus quickly emerge.
First, the plan’s topline figure is overly ambitious. Of the total amount, €650bn requires each member state to independently increase defence spending by 1.5% of GDP within the next four years. Most nations only barely meet the 2.0% Nato standard, and very few, if any, have given any indication that they plan to increase by such a large amount in such a short period of time.
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If the €650bn does not come from funds directly distributed by the EC, why does the EU take credit for it? The EC has announced this €650bn figure because it is about to activate the national escape clause of the Stability and Growth Pact. Previously, increasing defence expenditures at such a fast rate would have caused most states to trigger the Excessive Deficit Procedure. By activating the national escape clause, the EU is removing a barrier to increasing defence spending, but it is up to the member states to actually increase their spending. Frankly, the removal of this barrier will not suddenly cause many member states to increase their spending trajectory overnight.
To be sure, some countries will increase their spending at a higher rate because of this announcement. Germany’s selection of Friedrich Merz as chancellor stands out, as his newly formed government has plans to do ‘whatever it takes’ to decisively modernise the country’s armed forces. Even, so it would take a completely unprecedented level of spending to reach 3.5% of GDP, which would mark a 1.5% improvement on top of their current 2.0% of GDP spending level. An increase in this proportion would require spending several times greater than Germany’s €100bn special defence fund of 2022.
It is even more doubtful that the EU can convince a meaningful number of states to increase their spending by €650bn over the next four years. The removal of this barrier is not going to convince member states such as Spain or Italy that now is the time to make unprecedented investments in military modernisation. There will be a significant number of member states who instead choose to prioritize funding civil infrastructure and the social safety net because they are more concerned with domestic stability than external aggression.
The second area of focus is the remaining €150bn. This will come from EU loans to Member States, and it should be expected that this funding is rapidly distributed. Again, expect the countries most interested in defence to take the greatest share of these loans. This is an ‘opt-in’ funding scheme, so expect the countries who want to increase spending to be there and those who have not been motivated in recent years to continue to do very little. Naturally, as this is mostly about loans and capabilities, expect the rich and large countries with an urgency to modernize their capabilities to be the main participants. Watch Germany, Poland, Sweden, the Netherlands, France, and a few others.
While few, if any, insights are available to understand on what items this money will be spent, the European Defense Industrial Strategy (EDIS) outlines many of the ways the EU will encourage multi-member state cooperation on defence projects and R&D. It also puts forth mechanisms to prevent EU policies from impeding defence sector activities. The EDIS centres around decade-long ambitions but provides a glimpse as to the way the EU expects the funds to be spent. The EU wants projects to be produced in the EU and collaboratively sold to multiple member-states so that the programmes can be produced on a large scale at a low per-unit price. Within the document is an apparent focus on unmanned weaponry, chips, space systems, and more.
Undoubtedly it is admirable to see EU leadership pursue a strategy that advances collaboration between member states and an arsenal that makes greater use of the European defence industry, but if the EU truly cares about strengthening the armed forces of its member states it will need to do more than change debt rules and politely request countries take out loans to grow their defence budgets.
